MakerDAO Avoids Shutdown, to Auction MKR Covering $4M in Bad Debt
- The automated response of the protocol failed as Ethereum plunged too sharply.
MakerDao, one of the largest decentralized finance (DeFi) projects on Ethereum, will begin the auction of MKR governance token in two days - a step forced by the recent freefall of Ethereum.
The auction was triggered as the under-collateralized debts on the platform reached $4 million and is a step taken for the first time in the history of the project. The platform will programmatically mint and set the MKR tokens 50,000 DAI increments. All the funds will be utilized to cover outstanding bad debts.
The DeFi project issues loans in DAO, a Stablecoin Stablecoin Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including Read this Term, against Ethereum or Basic Attention Token (BAT) as collateral.
However, its woes started yesterday when Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term, including Ethereum, took a free fall plunging more than 30 percent in merely an hour.
Though in case of any abrupt market changes, Maker automatically sells the collateral to minimize the damages and take DAO off the market until the system hits its 150 percent collateral target, yesterday’s Ethereum price slump was too sharp, and the automated auction could not trigger.
Extreme measures are mandatory
This even forced the stakeholders of the project to consider a shutdown of the protocol as an extreme measure.
“An emergency shutdown (not happening now) would cause DAI holders to take a haircut, whereas the social contract of MakerDAO is that MKR tokens take a haircut in the event of system failure. Therefore we should try and ensure that MKR holders take a hair cut by avoiding emergency shutdown if possible. I heard that emergency shutdown is not being considered as an immediate option,” Ryan Berckmans, an Ethereum developer, wrote in a response call.
The community, however, will also re-evaluate the shutting down of the protocol if Ethereum plummets further.
“If Ether price drops another 30, 40%, then we might be looking at that,” LongForWisdom said on the call.
“Keepers and MKR buyers should prepare for sustained high gas prices, and downward pressure on ETH and MKR. The Dow Jones hit sell-off circuit breakers three times in the past week and a half. It’s a historic week,” Berckmans added.
MakerDao, one of the largest decentralized finance (DeFi) projects on Ethereum, will begin the auction of MKR governance token in two days - a step forced by the recent freefall of Ethereum.
The auction was triggered as the under-collateralized debts on the platform reached $4 million and is a step taken for the first time in the history of the project. The platform will programmatically mint and set the MKR tokens 50,000 DAI increments. All the funds will be utilized to cover outstanding bad debts.
The DeFi project issues loans in DAO, a Stablecoin Stablecoin Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including Unlike other cryptocurrencies like Bitcoin and Ethereum, stablecoins are cryptocurrencies that have been designed to keep a stable value. Placing a greater emphasis on stability over volatility can be a huge draw for some investors. Many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets.Stablecoins control for this volatility by being pegged to another cryptocurrency, fiat money, or to exchange-traded commodities, including Read this Term, against Ethereum or Basic Attention Token (BAT) as collateral.
However, its woes started yesterday when Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term, including Ethereum, took a free fall plunging more than 30 percent in merely an hour.
Though in case of any abrupt market changes, Maker automatically sells the collateral to minimize the damages and take DAO off the market until the system hits its 150 percent collateral target, yesterday’s Ethereum price slump was too sharp, and the automated auction could not trigger.
Extreme measures are mandatory
This even forced the stakeholders of the project to consider a shutdown of the protocol as an extreme measure.
“An emergency shutdown (not happening now) would cause DAI holders to take a haircut, whereas the social contract of MakerDAO is that MKR tokens take a haircut in the event of system failure. Therefore we should try and ensure that MKR holders take a hair cut by avoiding emergency shutdown if possible. I heard that emergency shutdown is not being considered as an immediate option,” Ryan Berckmans, an Ethereum developer, wrote in a response call.
The community, however, will also re-evaluate the shutting down of the protocol if Ethereum plummets further.
“If Ether price drops another 30, 40%, then we might be looking at that,” LongForWisdom said on the call.
“Keepers and MKR buyers should prepare for sustained high gas prices, and downward pressure on ETH and MKR. The Dow Jones hit sell-off circuit breakers three times in the past week and a half. It’s a historic week,” Berckmans added.